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The adoption of the euro by Cyprus

Author : Cyprus Center for European and International Affairs

By Amy Verdun

Abstract

On 1 May 2004 the European Union (EU) expanded from fifteen to twenty-five member states. As a condition for joining the ten new member states (NMS) have had to agree to adopt the full laws and treaties of the EU and eventually all the policies of the EU, including Monetary Policy. This paper, a part of a larger study on all ten states that examines the policy stance of each towards euro adoption, focuses on Cyprus and the specific challenges faced by the island state including the Turkish invasion and division of the island and the efforts to resolve the Cyprus problem.

Cyprus has chosen for a euro adoption policy that is fast. This decision is made first and foremost based on economic reasons, even though political and symbolic reasons play a role too. Cyprus is a small open economy heavily dependent on international trade and foreign investment. As for the specific problems facing Cyprus, it seems that it is not clear what will happen next. But it is widely held that once the Republic of Cyprus has joined EMU both the North and the South will participate in it, and that it would bring both parts closer together.

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